Chapter 2, Problem 2.28BP

a.

To determine

Concept introduction

The consolidated balance sheet and the worksheets are the computed tools that are used to calculated the retained earnings and the dividend produced by the subsidiaries towards its parent company.

To prepare: a journal entry by cost method for the investment in snoopy company in the year $2009$ .

Answer to Problem 2.28BP

The journal entry so passed gives a debit of investment and credit the cash with the same amount.

Explanation of Solution

Costmethod entry on books	Debit	Credit
Cash	$30,000$
Dividend income		$30,000$
Record P co. $100\%$ share of the snoopy co. $2009$ income

b.

To determine

Concept introduction

The consolidated balance sheet and the worksheets are the computed tools that are used to calculated the retained earnings and the dividend produced by the subsidiaries towards its parent company.

To prepare: the consolidate worksheet for the final values

Answer to Problem 2.28BP

The consolidate worksheet is prepared and discussed.

Explanation of Solution

Book value calculation
	Total book value	=	Common stock	+	Retained earnings
Original book value	$300,000$		$200,000$		$100,000$

Income statement	P	S	Dr.	Cr.	consolidated
Sales	$850,000$	$300,000$			$1,150,000$
Less Cogs	$\left(270,000\right)$	$(150,000)$			$(420,000)$
Depreciation Exp	$(50,000)$	$(10,000)$			$(60,000)$
Sel. Exp	$(230,000)$	$(60,000)$			$(290,000)$
Dividend Income	$30,000$		$30,000$
Net income	$330,000$	$80,000$	$30,000$		$380,000$

Statement of Retain Earning	P	S	Dr.	Cr.	Consolidated
Opening balance	$470,000$	$155,000$	$100,000$		$525,000$
Net income	$330,000$	$80,000$	$30,000$		$380,000$
Less dividend declared	$(225,000)$	$(30,000)$		$30,000$	$(225,000)$
End balance	$575,000$	$205,000$	$130,000$	$30,000$	$680,000$

Income statement	Peanut co	Snoopy co	Eliminated DR	Eliminated CR	consolidated
Cash	$230,000$	$75,000$			$305,000$
Accounts received	$190,000$	$80,000$			$270,000$
Inventory	$180,000$	$100,000$			$280,000$
Investment in snoopy co	$300,000$	$$		$300,000$	$0$
Land	$200,000$	$100,000$			$300,000$
Building and equipment	$700,000$	$200,000$		$10,000$	$890,000$
Less accumulated depreciation	$500,000$	$30,000$	$10,000$		$520,000$
Total assets	$1300,000$	$525,000$	$10,000$	$310,000$	$1,525,000$
Account payable	$75,000$	$35,000$			$110,000$
Bonds	$150,000$	$85,000$			$235,000$
Common stocks	$500,000$	$200,000$	$200,000$		$500,000$
Retained earnings	$575,000$	$205,000$	$130,000$	$30,000$	$680,000$
Total liabilities	$1300,000$	$625,000$	$330,000$	$30,000$	$1,525,000$